home Finance books Pricing - Erukhimovich IL

Pricing - Erukhimovich IL

7. Methods of setting prices in a market economy

As I mentioned earlier, with the help of prices realized the main results of the company. Production must make a profit. Therefore, the calculation basis and the establishment of the price of goods in a given market situation have priority. In summary, the producers considerations regarding the price level for a particular product are as follows:

In view of the selected method of pricing. In a market economy, its choice is influenced by various factors. The most significant include the type and characteristics of the product (degree of novelty, the possibility of replacing other commodities, etc..), Market conditions, the state of the enterprise (company) in the industry.

Consider the most common methods of pricing.

7.1. Establishment of sales prices on the basis of average costs and profits

This method is widely used in the domestic economy. In the administrative-command economy was a major. In a market economy, the scope of its use is limited. Under this method, the price should take into account the full cost of production and net income as profit from its implementation. Gains in the price is determined by the specification of a percentage of the cost (product profitability). The value of a commodity producer margins established for reasons of product profitability and competitiveness; it can be regulated by the State through the establishment of a boundary level of profitability.

This method is determined by the lower limit of the price, ie. E. The price of production. The market price may be lower than this limit only in exceptional cases and for a short period of time.

This method displays the traditional focus mainly on production, not on market demand and has both positive and negative sides. Positive - simplicity, negative - the lack of focus on market pricing factors (primarily on demand). Therefore, when a normally functioning market, such a scheme pricing abstract and divorced from the real market pricing conditions.

In real life, this method can use the enterprise (firm) -monopolisty (type of pricing policy "price leader"), manufacturing industry a completely new, original products (type of pricing, "skimming"), the company operating the unit (single) orders , companies that produce products for which the state limits the level of profitability.